In a speech delivered yesterday at Michigan State University, Senator Barack Obama opened with these words
We meet at a moment when this country is facing a set of challenges greater than any we’ve seen in generations. Right now, our brave men and women in uniform are fighting two different wars while terrorists plot their next attack. Our changing climate is placing our planet in peril. Our economy is in turmoil and our families are struggling with rising costs and falling incomes; with lost jobs and lost homes and lost faith in the American Dream. And for too long, our leaders in Washington have been unwilling or unable to do anything about it.
But what is it that "our leaders in Washington have been unwilling or unable to do anything about"?
The Isalmist threat? Senator Obama himself points out that we are fighting in two areas of operation in order to mitigate this.
The economy? The "economy" has only been in a downturn for maybe six months having been preceded by 6 years of very robust growth. Economies contract periodically. So what?
The Senator's opening paragraph does not foreshadow the speech to come because his speech is only peripherally about the War Against Islamists and The Economy.
His speech is about Energy. His speech is intended to set the stage for his being able to claim that he is a leader of the "new consensus" on Energy as he claimed to be the leader of the "new consensus" on Iraq.
All of his long term solutions are consistent with McCains solutions.
Now, increased domestic oil exploration certainly has its place as we make our economy more fuel-efficient and transition to other, renewable, American-made sources of energy. But it is not the solution....
A group of Democrat and Republican Senators sat down and came up with a compromise on energy... It’s a plan that would invest in renewable fuels and batteries for fuel-efficient cars, help automakers re-tool, and make a real investment in renewable sources of energy....It includes a limited amount of new offshore drilling, and while I still don’t believe that’s a particularly meaningful short-term or long-term solution, I am willing to consider it if it’s necessary to actually pass a comprehensive plan...
In addition, we’ll find safer ways to use nuclear power and store nuclear waste. And we’ll invest in the technology that will allow us to use more coal, America’s most abundant energy source, with the goal of creating five “first-of-a-kind” coal-fired demonstration plants with carbon capture and sequestration.
More drilling, more nuclear, more coal, more renewables. A consensus. Again. And he hopes to take credit for this by claiming the plan
includes many of the proposals I’ve worked on as a Senator and many of the steps I’ve been calling for on this campaign.
But he decries all of these as long-term solutions
George Bush’s own Energy Department has said that if we opened up new areas to drilling today, we wouldn’t see a single drop of oil for seven years. Seven years. And Senator McCain knows that...
So the Senator claims that these are the very same proposals he has championed: the Seven Year Solution. The Seven Year Consensus.
But Obama did not just offer "long-term" solutions. He offered a few short term solutions as well. And one of these solutions he was firmly against just a short time ago.
To the extent that oil prices remain high and we depend mostly on oil imports from nations hostile to us, and sympathetic to our enemies, we are strategically vulnerable.
And because we import more oil than we require, Senator Obama was correct in August of 2005 when he said
"I agree with the President's decision to release oil from the Strategic Petroleum Reserve to help replenish supply shortages resulting from Hurricane Katrina. Nearly all oil and natural gas production in the Gulf of Mexico has been shut down, and releasing this oil will help increase production and stabilize prices. However, I do believe that this tragedy makes it very clear that that the reserve should only be used in the event of an emergency, and that we shouldn't be tapping the reserve to provide a small, short-term decrease in gas prices.
"Catastrophic events like Hurricane Katrina are the reason the Strategic Petroleum Reserve was created, and releasing oil at this time is appropriate. But to truly provide Americans relief from skyrocketing oil prices, we must get serious about decreasing America's dangerous dependence on foreign oil by increasing fuel efficiency and investing more in the renewable fuels that can lead us down the path to energy independence." (emphasis is mine).
But in his speech yesterday, he reversed himself on this and got it exactly wrong
We should sell 70 million barrels of oil from our Strategic Petroleum Reserve for less expensive crude, which in the past has lowered gas prices within two weeks.
According to the Energy Information Administration, the US imports 10 million barrels per day so 70 million barrels is almost exactly one week of imports. But since the oil would be sold in the Global Marketplace, we really have to look at the global statistics. And if we do that we find that currently, the world produces 85.64 million barrels per day and consumes 85.54 million barrels per day.
Releasing 70 million barrels from the strategic oil reserve would increase the spare capacity of the world thereby reducing the price of oil products. And as we have seen, and the way markets work, is that decreasing the price of something increases the demand and, as a result, consumption.
In fact, oil prices have come down recently and dramatically because high oil prices have reduced demand. In fact we see from the data the oil prices spiked when oil demand outstripped oil supply. In the 4th quarter of 2007 the world produced 85.39 million barrels but the demand was for 85.59 million barrels.
So releasing the 70 million barrels would provide relief precisely as long as it took to use up that 70 million barrels, then the price could be expected to spike as that oil was no longer available to the world market.
But even worse then this, the price would not drop as much as if we were producing this oil. And this is because the market would know that the 70 million barrels is a fixed amount, a one trick pony, and so the market would calculate how long this oil surplus would last and adjust their bids accordingly.
And not only that, but the markets would know that at some point that 70 million barrels would have to be replaced, putting further demand on the oil production surplus.
Additionally, as the Senator pointed out, our enemies control most of the oil production. As a result, while the strategic oil is reserve is depleted by the 70 million barrels we are vulnerable to an energy "attack".Our enemies in Iran and Venezuela could see this as an opportunity to cut supply. Al Qaida could step up it's pressure on Nigerian Oil production and they could increase piracy activity off the coast of Somalia. The worst case scenario is that our enemies could put us in a position where we could not run our Army, Air Force and Navy with severe rationing on the ordinary citizen.
I guess then we would know we were at war, huh?
Increasing domestic energy production mitigates this threat as does the Strategic Oil Reserve.
Not able to stop there, the Senator offered one more short term-solution, one that targets the very companies we rely upon to deliver our oil: The Oil Companies (I mean the "evil" Oil Companies)
I believe we should immediately give every working family in America a $1,000 energy rebate, and we should pay for it with part of the record profits that the oil companies are making right now.
Now first off I am stunned that Obama would restrict this "windfall" to working families. It doesn't seem that a Democrat would neglect the non-working. I mean don't non-working families pay the price of higher oil too? I guess retirees will have to forgo any help from Obama.
Of course the real problem with this is that it would increase gas prices and anything that is made from Oil. And that is because a tax on a company is no different than higher oil prices: it is just another cost of doing business. Since Companies are in business to make a profit and provide a return on investment to their stock holders, they have to charge enough to cover their expenses (i.e. employees, materials, investment and taxes) and still make a profit.
So both these solutions are pure pandering.
But what the speech will allow, in the final analysis, is for Obama to claim he will drill, build nuclear power plants and invest in renewables.
And then claim he is the Leader of the New Consensus.
But, of course, it's all bogus. And even after this speech, I have no idea where he really stands on America's Energy policy.
Would Obama really allow the building of nuclear power plants? Would he really allow off-shore drilling?
I think the real consensus is we still don't know where Obama stands on most issues.
And the more he talks out of both sides of his mouth, the more confused people get.
